Yesterday Chancellor Jeremy Hunt delivered his Autumn Statement, with tax cuts and benefits rises in preparation for an upcoming general election.
For the economic forecasts, whilst GDP will grow by 0.6% this year (better than the 0.2% dip forecasted in March), growth is expected to slow overall. This is because while inflation is expected to drop to 2.8% by the end of 2024, it is taking longer to fall, and will take until 2025 to meet the OBR’s target of 2%. Prices will continue rising, but at a much slower rate than in recent years. And though headlines mention the largest reduction in living standards since the 1950s, the OBR says we should return to pre-pandemic living standards by 2027-28. As always with government statements and budgets, these announcements have little impact on your financial plan, which we regularly review and rigorously stress test. As part of this, your investment portfolio is globally diversified, aligned with your needs and built to create long-term wealth. Here’s our key takeaways from the rest of the statement: State Pension Increase The State Pension will rise by 8.5% in April 2024, following the triple-lock formula based on average earnings, inflation, or 2.5%. This will result in £221.20 per week for the full new flat-rate State Pension. National Insurance (NI) Cuts From 6 January, the rate of National Insurance (NI) will reduce from 12% to 10% for employees earning between £12,570 and £50,268. This should save £450 for someone with an average salary of £35,000. For the self-employed, Class 2 NI contributions will be abolished (currently £3.45 pw), and the Class 4 NI rate will reduce from 9% to 8% (on earnings between £12,570 and £50,270). Business Tax Relief For capital allowances, the government’s full expensing policy has now been made permanent, which allows businesses to write off the cost of qualifying expenditure against taxable income. Minimum Wage Increases Minimum wages will rise in April 2024, and the National Living Wage will increase from £10.42 to £11.44 per hour. Other age groups and apprentice rates will also see adjustments. Benefits Rises Universal Credit will increase by 6.7%, along with other benefits in April 2024, in line with rising prices. The average increase is estimated to be £470 for 5.5 million households next year. Alcohol and Tobacco Duty on hand-rolling tobacco will rise by 10%, while duties on beer, cider, wine, and spirits will be frozen until August next year. ‘One Pension Pot For Life’ The government is calling for evidence with a view to launching ‘one pension pot for life’. This would give savers a legal right to require a new employer to pay pension contributions into their existing pension, and avoid the need to set up (and manage) a new pension with every new job. For the long read, the government has published the full budget and related documents here.
If you have any questions or if there is anything we can do to help, please don't hesitate to contact us. All the best, The Team at Pura Vida
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